Question

Italiano, SpA is a corporation formed under the laws of Italy and operates there. Tomba is a U.S. tax resident that receives dividends from Italiano each quarter. Under U.S. rules, the dividends are sourced from what country?

a. United States
b. Italy
c. Residence of the recipient
d. Location of the corporation

Answer 1

Under U.S. tax law, dividends received by a U.S. tax resident from an Italian corporation are sourced to Italy, where the corporation is incorporated.

Step-by-step explanation:

The dividends that Tomba, a U.S. tax resident, receives from Italiano, SpA, are sourced from Italy. In U.S. tax law, dividend income is generally sourced to the country where the paying corporation is incorporated. Since Italiano, SpA is a corporation formed and operating in Italy, the dividends would be considered foreign source income for U.S. tax purposes.